Emerging market companies are global and domestic leaders
Positive change has altered the investment landscape
Emerging markets have experienced significant positive change over the past decade. Economic growth, urbanisation, the rise of middle-class consumers and the mass adoption of technology have all combined to alter the investment landscape.
The mass adoption of technology has enabled companies to penetrate further into rural areas and different sectors of society within emerging markets. This, coupled with the younger generation of consumers and their inclination toward digital, has helped to support the growth of internet/platform industry. In particular, in Asia these platform-based companies have been very successful because the social and structural contexts in which they began are very different.
Take microfinancing for example, Bank Rakyat Indonesia is helping a sector of society obtain financing where previously it may have been inaccessible to them. This may be for a variety of reasons including not having credit scores or lack of physical access. The ability to access financing from an app on their phone suddenly opens up a world of opportunity for that individual.
Fig. 1 STEM graduates create an increasingly sophisticated workforce1
The huge underpenetrated market, the speed of innovation and the quick adoption by consumers in turn creates an opportunity for investors not only to support an interesting business idea but also to make a positive impact.
Emerging markets have given rise to global leaders
The positive trends identified above have helped the growth of a variety of businesses in emerging markets. Alongside broader economic growth, the last decade has seen companies move up the curve in terms of complexity, human capital and intellectual property (IP). Many of these companies are leading the way in a global marketplace and are considered best-in-class, without true developed market peers.
The swathes of graduates in STEM subjects (science, technology, engineering and mathematics) have helped to create a highly skilled workforce, which is already innovating as seen by the high concentration of patent applications coming from these countries (figures 1 and 2).